The recent news that Nationwide had slashed interest rates on selected mortgage products to below 4% offered the first glimmer of hope to a property market that had been plagued by months of high interest rates.
Just a few weeks on, and not only are Nationwide still offering sub-4% rates on selected mortgage products, but they’ve also opened the door for other lenders to do the same.
As of this month, eight other major high street lenders have introduced low fixed-rate mortgage deals beneath 4%. Including Nationwide, this now means that UK buyers and homeowners can find mortgage deals of below 4% at nine different banks or building societies – a rate that we haven’t seen widely offered in the marketplace since last April.
Why this matters and who can gain
With higher rates on mortgages driving up monthly repayments, the UK property market has found itself in something of a slump in recent years – albeit managing to sidestep the crash that some had anticipated.
As cost-of-living pressures continue to put a squeeze on incomes, mortgage products at the lowest levels we’ve seen in some time could provide a much-needed helping hand to those already on – or seeking to get on – the property ladder.
Some of the groups set to benefit from mortgage rate reductions include:
Homeowners needing to remortgage
For those whose fixed-rate deals are about to end, the news that mortgage rates below 4% are now available should bring considerable relief, especially when you consider that two-year fixes available in July 2023 peaked at 6.86%. By comparison, the average two-year fix in July this year equated to 4.59%. While this demonstrates just how far rates have fallen in the past 12 months, a 4.59% rate would still represent a significant leap for those coming off low, sub-1% mortgages secured in the wake of the pandemic.
Anyone currently on a tracker mortgage
You don’t have to be in a position to switch mortgage product or renew your existing deal in order to benefit from the lower interest rates currently available. The recent cut to the Bank of England base rate (the first in four years) means that anyone currently on a tracker mortgage will also experience a reduction in their monthly mortgage repayments. This is owing to the fact that tracker mortgages, unlike fixed-rate deals, track the BOE base rate. Therefore, if the rate gets cut (as it recently did from 5.25% to 5%) then interest rates on tracker mortgages also typically lower too.
Buyers with a 25% to 40% deposit
As with many preferential mortgage rates, some lenders offering sub-4% mortgage products have attached conditions to access these lower rates of interest. In the case of NatWest, Barclays, and HSBC, all of whom are currently offering fixed-rate repayment deals at less than 4%, buyers will require a 40% deposit in order to qualify. However, lenders like Nationwide and Virgin Money are offering sub-4% deals at just 75% loan-to-value. While a 25%-40% deposit is up to four times higher than the average required by most lenders, it does mean that anyone able to make the figures work will be able to take advantage of these exclusive deals.
Existing homeowners looking to downsize
If you’re looking to downsize and are able to release 25% or more equity in your home, you could also stand to gain from the sub-4% mortgage products currently being marketed. This creates a perfect window of opportunity for those living in larger homes that may no longer suit their lifestyle to be able to move more affordably, and live more comfortably, by leveraging lower interest rates on selected sub-4% mortgages.
Which UK lenders are offering sub-4% fixed-rate mortgages?
At the time of writing (August 2024), a total of nine UK lenders are advertising repayment mortgages at interest rates below 4%.
Using a 60% loan-to-value (LTV) ratio and a 26-year term as an illustration, these lenders include:
- Barclays
- Nationwide
- NatWest
- HSBC
- First Direct
- Coventry Building Society
- Lloyds Bank
- Halifax
- Virgin Money
Of these, Barclays’ five-year fixed rate is currently the lowest, at just 3.83% with an £899 product fee, closely followed by Nationwide at 3.83% with a £999 product fee, and NatWest at 3.83% with a £1,495 product fee.
The lowest three-year fix is also being offered by Barclays at 4.01% with a £999 product fee, while the lowest two-year fix we could find is with Nationwide at 4.15% with a £999 product fee – again, this illustration is based on a 60% loan to value and a 26-year term.
When we upped the loan to value to 75%, which would require buyers to have a 25% deposit, only two lenders – Nationwide and Virgin Money – were able to offer us sub-4% mortgage deals at five-year fixes for the same 26-year term.
Contact to our mortgage advisors about sub-4% mortgage deals
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If you’d like to discuss your circumstances in a no-obligation chat with our experienced team, simply arrange an appointment via our online contact form.
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